The Lehman Roulette

How did an investment powerhouse with a 150-year history go belly up overnight? A pedigree heavily pockmarked by risk did it in, in short. For more, turn to The Devil's Casino: Friendship, Betrayal, and the High-Stakes Games Played Inside Lehman Brothers by Victoria Penelope Jane Ward, better known as Vicky Ward. The book tells everything good and bad at the marquee (when alive) investment bank and, on the way, has raced to the New York Times bestseller list. Its brilliant narrative, steeped in deep, multi-level investigation, is the best financial read to hit the shelves in a while.

This reviewer assessed Harry Markopolos' No One Would Listen for BT readers in May, calling it "unputdownable"; The Devil's Casino is better. The envy of any reporter, Ward's 270 pages of work replete with anecdotes and detail tells the story of Lehman through three central characters - CEO Dick Fuld, Joe Gregory, its President and Chief Operating Officer (COO) when Lehman filed for bankruptcy late in 2008, and Chris Petit, President and COO until November 1996.

Fuld, who was the subject of bad press for attempting to divert blame for the investment bank's demise, is painted as an ambitious professional with his sights set on overtaking the bigger Goldman Sachs. Gregory is shown as a guileful professional who always knows which side of his toast is buttered and how to make it stay that way. Petit, a decorated Vietnam veteran, is the good guy - focussed on teamwork, fairness and happy to run the foot soldiers as Fuld reigned.

Sample the richness of reporting in The Devil's Casino. After hedge fund Long-Term Capital Management went bankrupt in September 1998, Lehman was under the lens as one of the Wall Street investment banks that may have been badly wounded. Ward describes an interaction that November Fuld had with his Chief Financial Officer John Cecil: 'At one point Cecil feared Standard & Poor's would hold its rating (on Lehman). He went to Fuld and said, "We're dead." Fuld replied, "Can't be. Go back." He then lay down in the corridor outside of his office and looked up at the diminutive CFO. "Do you want me to lie down like this?" Cecil went back to S&P and prevailed.'

The culture at Lehman, concludes Ward, was one that was built on lies, subterfuge and nepotism. A fair share of this exists at every organisation, to be sure, but her point is that this culture alienated and eliminated capable and conservative brains, who would have kept risk at manageable levels at the firm and, perhaps, helped it stay alive even today.

Ward's research is intense and long. She lost count of the hours of interviews she had conducted. When she was on her 106th tape (each tape 180 minutes long) of interviews, her tape recorder broke down. And, that was at just about one-fourth of her work.

Through the book, there is only one shadow of doubt in this reviewer's mind. Given the whispers on how Goldman Sachs pulled through the financial meltdown of 2008 with the blessings of the powers at Washington D.C. (Treasury Secretary Hank Paulson was formerly top honcho at Goldman), one wonders if there is some sublime messaging coming through: Goldman and Wall Street investment banks look like kind souls in the book. Heck!

Still, a great read